The European Central Bank is reportedly assessing allegations that Deutsche Bank underplayed risks on its balance sheet and presented an overly robust picture of its financial strength, according to the Financial Times.

Europe’s banking supervisor has asked the German lender detailed questions in recent months about its use of netting, a practice that consolidates and offsets multiple financial obligations to reduce credit risk exposure and shape regulatory capital calculations.

One person familiar with the process told the paper that the enquiries form part of a broader, standard review across several lenders. The ECB has not yet decided whether to take formal action, such as opening an investigation.

The claims originate from a former Deutsche Bank employee, Dario Schiraldi, who is suing the bank. In a letter to the ECB, Schiraldi said Deutsche’s balance sheet was “materially affected by aggressive netting and off-balance-sheet accounting techniques,” alleging an “apparent understatement of leverage exposures by over €200 billion” in the bank’s 2024 financial statements. He argued the approach inflated capital and leverage ratios and gave “a misleading picture of the bank’s financial soundness to regulators and markets alike.”

Deutsche Bank has rejected the allegations. The lender told Reuters: “We apply netting in accordance with relevant accounting standards and generally aligned with common industry practice.”

At the end of September, Deutsche reported a Common Equity Tier 1 ratio of 14.5 per cent, above its internal target and minimum regulatory requirement, and total leverage exposure of €1.3 trillion, the Financial Times reported. The newspaper also noted previous friction between the ECB and Deutsche last year over concerns the bank may have underestimated potential loan losses.

Schiraldi is separately seeking €152 million in a civil case filed in Frankfurt, linked to an internal probe he says contributed to a criminal conviction in Italy that was later overturned on appeal. Deutsche has said the legal claims by former employees in that matter are “entirely without merit” and that it will defend itself robustly.

The ECB’s current enquiries are understood to be part of its ongoing supervision of capital rules and collateral treatment. Whether they escalate into a formal investigation will depend on the watchdog’s assessment of the evidence and responses provided by Deutsche Bank.

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